Enhancing Competitiveness and Market Value
through Corporate Governance”
Local Insight Global View
Presented by: Anthony Muh
For:
Shanghai Stock Exchange
Asian Corporate Governance Association
services provided by:
Salomon Brothers Asset Management
Smith Barney Asset Management
Citibank Global Asset Management
and affiliated advisory entities
Global Presence
Global Perspective with Local Insights
• 15 investment centres and 9 global research centres located in key strategic markets
Warsaw
London
Tokyo
Stamford
New York
San Francisco
Hong Kong
Singapore
São Paulo
Melbourne
As at 30-Sep-2004.
2
Citigroup Asset Management
A Snapshot
Global presence
•
•
15 investment centers and 9 global research centers located in key strategic markets
Approximately 2,600 employees in 20 countries worldwide
Competitive position
•
•
US$5012 billion in client assets under management
The 9th largest asset manager based on worldwide assets1
Investment capabilities
•
•
•
3
Full spectrum of equity, fixed income, balanced and alternative investment strategies
400 investment professionals
Sophisticated, proprietary technology combined with market experience help us manage risk
As at 30-Sep-2004.
1 This ranking is based on the 2004 Pensions & Investments Money Manager Survey
The investment advisory services of Citigroup Asset Management are provided by Salomon Brothers Asset Management Inc, Smith Barney Asset
Management (a division of Citigroup Global Markets Inc.), Citibank Global Asset Management (a unit of Citibank, N.A. and Citibank International plc),
Citigroup Asset Management Limited and affiliated advisory entities.
2 The Asset Management businesses include Citigroup Asset Management (CAM), Citigroup Alternative Investments’ (CAI) Institutional business,
Banamex Asset Management and Retirement Services businesses, Koram Asset Management, Travelers Property and Casualty/Travelers Asset
Management International Corporation Fixed Income business and Citigroup’s other retirement services businesses (includes Citistreet’s Retirement
Services and Latin America Retirement Services businesses) in North America and Latin America.
The Investment Platform
•
Proprietary fundamental research combined with disciplined valuation framework
identifies attractive investment opportunities
•
Portfolio Management, Fundamental Research and Quantitative Research work as a
team to aim to maximise the impact of proprietary information and insights
•
Apply repeatable, successful processes with world-class research resources
Portfolio
Management
28 teams
worldwide
Quantitative
Research
Over 30 quantitative
analysts
Fundamental
Research
Over 130 global equity
research analysts
and associates
4
Philosophy and Style
“we believe by using proprietary research to define intrinsic
value and combining that with shorter term earnings
momentum will deliver consistent outperformance”.
5
Research is based on identification of sustainable long term
cash generation
20
ROE
15
Average = 12% ROE
10
5
Time
Sustainable Growth Rate
Historic
Normalised Earnings
Operation earnings per share
70
60
50
40
30
20
10
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
6
2008
2009
2010
Deriving for an appropriate discount rate
Country
Risk
Country
Liquidity
Country
Momentum
Country
Valuation
Top-down
Sector
Bottom-up
Balance
Sheet
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Earnings
Variability
Earnings
Forecastability
Corporate Governance – how it really impacts valuation?
Corporate governance a useful tool for measuring management commitment to
creating shareholder value.
Various studies, including those by McKinsey (2000) and the City University of
Hong Kong (2003), suggest that good governance tend to lead to lower capital
costs, higher valuations and stronger stock price performance as investors
appear willing to pay some premium for investments in companies that display
superior corporate governance standards.
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Defining intrinsic value
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Source: Internal. This is for illustration purposes only and does not represent our forecasts or any recommendation to purchase/ sell any security.
Ranking intrinsic value
Utilities
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Company Name
Cty
DDM FV
Price
Ret to FV
ESR
DDM
Alpha
KOREA ELECTRIC POWER CORP
CHEUNG KONG INFRASTRUCTURE
PLUS EXPRESSWAYS BHD
DATANG INTL POWER GEN CO-H
HUANENG POWER INTL INC-H
MALAKOFF BHD
AUSTRALIAN GAS LIGHT COMPANY
HONGKONG ELECTRIC HOLDINGS
HONG KONG & CHINA GAS
TRANSURBAN GROUP
GAIL INDIA LTD
CLP HOLDINGS LTD
TENAGA NASIONAL BHD
KR
HK
MY
CN
CN
MY
AU
HK
HK
AU
IN
HK
MY
36357.61
26.14
2.99
7.19
7.31
6.67
14.75
39.24
13.46
5.51
167.89
41.93
9.73
22250.00
20.95
2.59
6.70
6.35
6.50
13.33
34.70
14.95
5.62
200.50
44.90
11.40
63.4%
24.8%
15.3%
7.3%
15.1%
2.6%
10.6%
13.1%
-9.9%
-1.9%
-16.3%
-6.6%
-14.7%
0.30
-0.10
0.10
0.48
-0.37
0.30
-0.20
-0.66
1.10
0.01
-0.34
-0.30
-0.52
1.95
0.75
0.29
0.01
0.28
-0.15
0.08
0.20
-0.88
-0.51
-0.80
-0.73
-0.75
2.27
0.83
0.37
0.28
0.10
0.00
-0.04
-0.18
-0.42
-0.62
-1.05
-1.08
-1.09
Global High Grade Credit Research
• Fundamental equity research output is the starting point for credit analysis
– Financial forecasts including credit ratios
– Company-specific risk analysis
– Industry outlook
Standardised
Research Template
Disciplined and Structured Approach
to Fundamental Credit Assessment
Financial Analysis
– Equity research
template
– Financial flexibility
– Operating performance
– Capital structure
– Financial policies
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Company Analysis
– Industry/markets
– Country of domicile
– Management
– Corporate
structure/governance
– Ownership
– Event risk
Standardised
Credit Report
Citigroup Ratings
– Long-term rating
– Rating outlook
– Event risk
– Probability rating
Ratings Comparison
Case Study – Telecoms
• For companies under coverage, CAM has been ahead of the Rating Agencies
Telecom Ratings
7.5
A
7.0
6.5
A-
6.0
5.5
5.0
BBB+
4.5
4.0
8/
1/
10 2 00
/1 0
/
12 200
/1 0
/2
2/ 000
1/
2
4/ 001
1/
2
6/ 001
1/
2
8/ 001
1/
10 2 00
/1 1
/
12 200
/1 1
/2
2/ 001
1/
2
4/ 002
1/
2
6/ 002
1/
2
8/ 002
1/
10 2 00
/1 2
/
12 200
/1 2
/2
2/ 002
1/
2
4/ 003
1/
20
03
BBB
For illustrative purposes only. This example should not be construed as investment advice or a recommendation to buy or sell a security.
Please see endnotes for additional information.
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CAM
S&P
Moody's
Important Note
The information in this presentation is of a general nature only and is not intended to be, and is not, a complete or
definitive statement of the matters described in it. The information does not constitute specific investment advice
and does not include recommendations on any particular securities or markets. Although statements of fact in this
presentation have been obtained from and are based upon sources we believe to be reliable, we do not guarantee
their accuracy, and any such information may be incomplete or condensed. All opinions and estimates included in
this communication constitute our judgment as of the date of this communication and are subject to change
without notice. This presentation has not been prepared to take into account the investment objectives, financial
objectives or particular needs of any particular person. Before making an investment decision you should
consider, with or without the assistance of a financial adviser, whether such an investment is appropriate in light of
your particular investment needs, objectives and financial circumstances. We do not accept any liability for any
direct or indirect loss arising from any reliance on the information contained in this presentation.
The contents of this document may not be reproduced or distributed in any manner without prior permission by
Citigroup Asset Management.
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